MOORLACH UPDATE — Good Luck With That — September 17, 2017

Sacramento just doesn’t get it. A housing crisis is not solved with new fees, bonds, and local government process overrides.

Let’s talk about housing. KQED provides some of the gory details in the piece below. But, allow me to elaborate. A quick tip, KQED provides the last act first.

For Senate Bill 3 (and 5), I provided the following abbreviated concerns on the Senate Floor:

1. Let’s review the housing market over the last eleven years. In Orange County, the median price for a home in 1996 was $221,800. Ten years later, after the subprime mortgage boom (for fun, watch “The Big Short”), the median rose to $739,000. With the Great Recession, the median went down to $498,200 in 2011. And, as of June 2017, it is back to $734,200.

2. Why the recent resurgence?
A. A slow, but steady rise in job growth.
B. Foreign investors. They came in at the market low as a safe haven.
C. Explaining an increase of all-cash transactions; more than 50% in 2013.
D. This has caused a decrease in home ownership and more renters.
E. Difficulty for developers to obtain entitlements and to build.
F. The other usual suspects, like NIMBYism, CEQA and open space demands.
G. For those lucky enough, try working with the California Coastal Commission.

It makes you wonder, what has Sacramento done to address foreign buyers and entitlement restrictions? And, I can see now why SB 714 (Newman) was removed from the calendar this last week, as it doubles down on taking entitled property for building new homes in the city of Brea and requiring total open space. Boy, this bill was so out of touch, the Democrats had to save the author from himself. But, I digress.

3. What is the current dilemma?
A. Americans find the home buying process too overwhelming.
B. They find it too difficult to come up with the down payment.
C. More than other generations, Millennials value experiences over ownership.
D. Americans change jobs more often than in previous generations.

With SB 2, Sacramento will be adding to the burdens. Within minutes, the Democrats also voted for AB 166 (Salas), which provides exemptions from the new SB 2 fees. You can’t make this stuff up. And those who qualify are not those going through a foreclosure!

Then I warned them about issuing more debt by sharing the following disturbing data from Moody’s Investors Service. Among the 10 largest states in the nation, California joins Illinois and New York as the three worst in all of the following categories:

1. Debt to personal income — 4.70%, when the median for all states is 2.50%.
2. Debt per capita — $2,323, when the median is $1,025.
3. Debt as a percentage of state GDP — 3.94%, when the median is 2.21%

And the state’s own bond credit rating is a measly AA-, just above Illinois, at BBB+. This means that California will be paying higher interest rates than issuing states with top credit ratings.

If this wasn’t enough of a reason to vote against the bond measures, I also gave a lecture on future budget and balance sheet concerns — a “what’s up?” listing:

1. A $4 billion bond translates into $225 million per year in payments! Where will this come from? The Senate approved two such bond bills on Friday.
2. The annual contributions for CalPERS and CalSTRS are also rising.
3. The Proposition 98 school funding threshold into the General Fund is also rising.
4. The minimum wage is rising and will impact the budget by $4 billion per year.
5. The recent voter approved $9 billion bond for school improvements will impact the General Fund by $500 million per year (no wonder the Governor hasn’t released any tranches).

What does all this mean? In a few short years, the General Fund is screwed. But I put it more politely on the Senate Floor, stating that “it will be dramatically impacted. Good luck with that.”

Sacramento so much wants California to be like other blue states that are heading for the fiscal precipice, such as Connecticut, Illinois and New York. And quickly. But, this is the wrong race to be in.

You can bet the Governor will sign these bills and the monopoly party will pat themselves on the back for once again dealing with a problem with inappropriate solutions. Tragic.

THE CALIFORNIA REPORT

Housing Bill Package Passes

Legislature, Goes to Gov.

Brown

By Guy Marzorati

https://ww2.kqed.org/news/2017/09/15/housing-bills-clear-toughest-hurdle-at-state-capitol/

A package of landmark housing legislation is on its way to the desk of Governor Jerry Brown, after receiving final passage in the State Senate.

After a dramatic vote in the Assembly on Thursday night, bills to fund housing construction and streamline development rules received easier passage in the Senate.

“In my mind, this is a really historic day,” said Senator Toni Atkins, D-San Diego. “Together, we are lifting many of our residents out of poverty.”

Governor Brown supports Senate Bills 2, 3, and 35, and is expected to sign the legislation.

Senators had already approved earlier versions of the bills earlier this year.

Once again, moderate Democrats Steve Glazer, D-Orrinda, and Josh Newman, D-Fullerton voted in favor of a controversial real estate fee in SB 2 that will create new funding for affordable housing.

Senate Bill 3, a $4 billion affordable housing bond, passed with 30 votes. It will appear on the November 2018 statewide ballot if signed by Brown.

All Republicans opposed the fee in SB 2, which would be paid by homeowners on transactions like a mortgage refinance.

Senator John Moorlach, R-Costa Mesa, said SB 2 is “taxing those who are having a tough time because they can’t afford down payment.”

Instead, many Republicans said the state should be focused on eliminating roadblocks to housing development.

That led four GOP members to support Senate Bill 35, which makes it harder for cities to block new housing if they had failed to meet regional goals for approving developments. Despite losing seven Democrats, the measure passed on a 23-14 vote.

Original Post:

A package of bills representing the Legislature’s most significant push in years to address California’s housing crisis overcame its largest hurdle to date, passing the State Assembly on Thursday night. But it didn’t come without suspense.

The bills earmark billions of dollars for home construction, and enact rules making it harder for local governments to block new developments, with the overarching goal of increasing housing stock in the state.

“We are once again showing that here in California we are stepping up and getting the job done,” said Speaker Anthony Rendon, ( D-Lakewood).

In a late night vote, the Assembly approved six housing measures, including the three most high-profile bills: Senate Bill 3, a $4 billion bond measure, Senate Bill 2, a new permanent source of affordable housing, and Senate Bill 35, legislation that makes it harder for local governments to block housing developments.

SB 2 would provide hundreds of millions of dollars in new funding for housing through a $75 fee on real estate transactions, such as those filed in a mortgage refinance, or the redemption of a foreclosed home. The fee would be capped at a total of $225.

“One thing we all share at this time is that we are living in the worst housing crisis that our state has ever experienced,” said David Chiu, (D-San Francisco) chair of the Assembly Housing Committee. “SB 2 is at the heart of what we need to do.”

The vote on SB 2 provided most of the night’s drama.

Like SB 3, the proposed fee required a two-thirds vote in the Assembly, meaning Democrats could not afford to lose any votes if Republicans unified in opposition.

That calculation changed during floor debate, when San Diego Republican Brian Maienschein announced he would support the measure.

Maienschein, the former San Diego commissioner on homelessness, mentioned the issue of Californians living on the street as his motivation for voting in favor.

Half of the money collected from SB 2 in its first year would go towards assisting Californians who are homeless or at-risk of homelessness.

“I do feel compelled to act,” he said. “I wish there was something different to be done, and to do nothing to me isn’t an option.”

But the bill wasn’t out of the woods yet. After debate over the measure ended, three Democrats remained unconvinced.

Democrats Sabrina Cervantes of Riverside, Adrin Nazarian of the San Fernando Valley and Marc Levine of Marin refrained from voting for the fee hike.

Cervantes is a swing-district Democrat who also didn’t vote on July’s cap-and-trade extension.

Levine voiced his opposition to the real estate fee during the summer recess, instead calling for California corporations to shoulder a tax increase to pay for housing.

After holding out for almost an hour — and paying a visit to Speaker Rendon’s office — Levine and Nazarian both relented and voted for the measure.

Rendon and Levine said no side deals were exchanged for their ‘aye’ votes.

“What I’m most concerned about is that the work continues,” Levine told KQED after the vote. “That we’re trying to find flexible policies that help all Californians in all communities plan for the housing we desperately need.”

Getting 54 votes on SB 2 was the culmination of a furious four weeks of negotiating and vote whipping after the Legislature returned from recess in August.

The bill carried the distinct disadvantage of being a legislative caboose on a train with several tough supermajority votes.

In just the last five months, moderate Democrats had been asked to support a road repair bill that raises the gasoline tax and an extension of the state’s cap-and-trade system that will likely increase fuel prices as well.

The third request on moderates, many of whom represent swing districts, came with little time left in the legislative year. That forced SB 2 to compete for public attention with the usual logjam of bills jockeying for passage before Friday’s end-of-year deadline.

Lawmakers pushing the housing fix also had to do without much public help from Gov. Jerry Brown.

Brown, who made fiery, meme-generating speeches in the final days before successful votes on the road repair and cap-and-trade bills, didn’t make a similar rally for the housing bills.

After the vote, Brown did send out a tweet of approval for the bills, which he supports, and is expected to sign if they pass the Senate.

Senate Bill 2 was able to gain support through a series of tweaks; more money was added for the homeless, and a greater share of funds will be directed to local government.

Additionally, language was added to a separate bill to create a hardship exemption for some low-income Californians. Levine said this provision was critical to gaining his support for SB 2.

The Assembly also passed a separate funding measure, SB 3, a $4 billion housing bond that will go before voters in November of 2018, if given final approval by the Senate and signed by the governor.

The bond passed the Assembly on a 54-20 vote, with Republicans Maienschein and Catharine Baker (R-Dublin) voting in favor.

For the most part, Republicans shied away from supporting the bonds and fees, instead arguing that the elimination of regulatory roadblocks would spur more development.

“We’re not talking about zoning,” said Devon Mathis (R-Visalia). “We’re talking about throwing more money at it.”

Legislation to ease restrictions on development also sailed to passage on Thursday night, needing only a majority vote.

The key streamlining measure was Senate Bill 35, which would bypass certain local reviews for developments in cities that have fallen behind on regional housing goals.

Opponents from both parties worried the bill would remove local control from important planning decisions.

“I might have agreed with [that argument] five years ago or ten years ago,” said Laura Friedman (D-Glendale). “But we’re in a really different climate right now. We’re in a crisis, in a housing crisis,” she said before voting for it.

The measures now head back to the State Senate for passage on Friday, the last day in the Legislature before a recess until the new year.

KQED’s Scott Shafer contributed to this report.

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